Microsoft Shares Eyeing Breakdown on Weak Earnings?

Microsoft shares are trading inside a rising wedge pattern and price is approaching the peak, signaling an imminent breakdown. The 100 SMA is below the 200 SMA so the path of least resistance is still to the downside.

In addition, stochastic is pointing down and heading out of the overbought region, which means that sellers are taking control. Similarly RSI is on its way out of the overbought area and is moving south so share prices could follow suit.

If so, Microsoft shares could head to the next area of interest around $53/share or lower. However, if an upward crossover is completed, price could carry on with its slow climb or consolidation.

Microsoft earnings turned out weaker than expected, with both profits and revenues falling short. The company’s net income in the third quarter ended March 31 fell to $3.76 billion, or 47 cents per share, from $4.99 billion, or 61 cents per share, a year earlier. Microsoft partly blamed a higher-than-expected tax rate for their lower income.

Adjusted revenue of $22.08 billion was short of the $22.09 billion analysts had expected. Microsoft earned 62 cents per share, lower than estimates of 64 cents per share.

Analysts concluded that Microsoft’s cloud business might not be enough to make up for its slowing personal computer market. According to Microsoft executives, due to pressure on products that were tangential to the main cloud push, such as server software.

Revenue in Microsoft’s intelligent cloud division grew 3% but PC shipments fell 11.5% worldwide and are expected to keep tumbling in the coming months. Microsoft shares were down more than 5.5% after hours when the report was released.

To contact the reporter of the story: Samuel Rae at samuel@forexminute.com

Samuel Rae is an active retail trader across a variety of assets, including currencies, stocks and commodities and the author of Diary of a Currency Trader (Harriman House). His personal strategy focuses primarily on classical technical charting patterns with a fundamentally supportive bias, combined with a strict, risk management-driven approach to entries and exits. He is an Economics graduate from Manchester University, UK.

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